🧾 At a Glance
While everyone’s busy hunting EV multibaggers and AI moonshots, Swaraj Engines just kept building tractors, compounding cash, and distributing generous dividends. Over the last 5 years:
- Sales up from ₹987 Cr → ₹1,682 Cr
- Profits up from ₹93 Cr → ₹166 Cr
- ROCE above 50%
- Dividend payout: consistently over 75%
- Stock up 27% CAGR in 5 years, outperforming many flashier names
All this — without a single rupee of debt.
🏭 About the Company
- Incorporated in 1985, Swaraj Engines Ltd (SEL) is a joint venture between Mahindra & Mahindra and Kirloskar Oil Engines.
- It manufactures diesel engines (22–65 HP range) and hi-tech engine components for Swaraj tractors.
- Key client = Mahindra Swaraj Division, which means business is stable but highly concentrated.
👨💼 Key Management Personnel (KMP)
- Chairman: Dr. Anish Shah (M&M Group)
- MD & CEO: Mr. Rajiv Gupta
- Ownership: Mahindra holds over 52.12%, ensuring strategic alignment
📊 5-Year Financial Performance
| FY | Revenue (₹ Cr) | Net Profit (₹ Cr) | OPM % | ROCE % | EPS (₹) | Dividend Payout % |
|---|---|---|---|---|---|---|
| FY21 | 987 | 93 | 14% | 48% | 76.24 | 91% |
| FY22 | 1,138 | 109 | 14% | 50% | 90.14 | 89% |
| FY23 | 1,422 | 134 | 13% | 55% | 110.00 | 84% |
| FY24 | 1,419 | 138 | 13% | 52% | 113.50 | 84% |
| FY25 | 1,682 | 166 | 14% | 57% | 136.64 | 76% |
📈 Compounded Profit Growth (5Y): 19%
📈 Stock Price CAGR (5Y): 27%
💰 Average Dividend Yield: ~2.5–3%
🏦 Balance Sheet Snapshot (Mar 2025)
| Metric | Value |
|---|---|
| Net Worth | ₹419 Cr |
| Total Assets | ₹672 Cr |
| Borrowings | ₹1 Cr (almost negligible) |
| Cash & Equivalents | ₹100+ Cr |
| Fixed Assets | ₹110 Cr |
| Investments | ₹19 Cr |
🚫 No major capex, no risky bets, and enough cash to survive a tractor apocalypse.
🧮 Forward-Looking Fair Value Estimate (FY26–27)
| Assumptions | Estimate |
|---|---|
| EPS FY26 (Est.) | ₹145–₹155 |
| P/E Multiple (Fair Range) | 25x–30x |
| 🔮 Fair Value Range | ₹3,625 – ₹4,650 |
At CMP ₹4,010 — stock is fairly priced with upside tied to tractor demand and P/E rerating.
🚜 Growth Outlook & Industry Trends
- Tractor industry expected to grow 7–9% CAGR over next 3 years
- Swaraj Engines rides on Mahindra’s dominance in agri-tractors
- Diesel engine relevance remains intact in the HP range Swaraj operates in
- Risks include: electric tractor tech (long-term), commodity prices, and client concentration
Key Drivers:
✅ Rural infra spend
✅ Monsoon dependency
✅ Mahindra’s expansion in Africa/South Asia
✅ Higher mechanization in farming
🔍 Why It Stands Out
| Trait | Why It Matters |
|---|---|
| 💰 High ROCE (57%) | Efficient capital use |
| 🧘 Zero Debt | Peace of mind |
| 🤑 80%+ Dividend Payout | Steady income stream |
| 🚜 Tractor Dependency | Niche but growing segment |
| 📈 Consistent EPS growth | 76 → 136 in 5 years |
This is compounding without chaos — the kind Warren Buffett would admire over dal-chawal.
🧠 EduInvesting Take
Swaraj Engines is the anti-hype stock that delivers.
No press releases about EVs. No flashy AI announcements. Just solid diesel engines and dividend cheques.
In a world of financial FOMO, it’s the uncle in your neighbourhood who bought LIC policies, farm land, and HDFC shares — and now quietly pays for his grandkid’s Ivy League tuition.
If India’s tractor story is to continue, Swaraj Engines will be under every hood.
But remember: one customer, one vertical — no room for mistakes. This is a tractor-only temple.
🛑 Risks & Red Flags
- 🚨 Customer concentration risk: Mahindra is its only meaningful client
- 🐌 No diversification: Business = only diesel tractor engines
- 🔋 EV transition (in 10–15 years) may reduce relevance
- 🌦️ Rain god risk: Bad monsoons = lower tractor sales
- 🧾 VAT penalty of ₹40.8L in FY25 (minor, but noted)
📊 TL;DR Summary
- ✅ Rock-solid fundamentals with 50%+ ROCE, zero debt
- ✅ Profitable, growing, high dividend payer
- ✅ Tractor demand proxy via Mahindra Swaraj
- ❌ One-client shop — dependency risk is real
- CMP ₹4,010 — fair for a quality compounder
If this stock were a person, it’d be the valedictorian farmer — low-key brilliant, self-sufficient, and debt-free since birth.
Tags: Swaraj Engines, Mahindra Tractor, diesel engine stocks, smallcap compounder, ROCE kings, dividend stocks, auto ancillaries, Indian agriculture stocks
Author: Prashant Marathe
Date: 12 June 2025
